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It’s a question of near-universal interest — whether we own a home, want to buy a house or make a living in the housing industry: Where is the U.S. housing market headed?

A look at at the year ahead

Interestingly, the answer to that question lies perhaps less in economics than demographics. Specifically with one remarkable demographic reality: Nearly one-third (32%) of Americans age 18-34 are currently living at home with their parents, according to Pew Research Center. That means 25 million millennials are still crashing with mom and dad.

The housing market is heavily driven by another demographic trend known as ‘household formation.’ The more households we create, the more upward pressure is exerted on housing prices. So, the sooner Junior gets out of the basement and finds a serious girlfriend, the better. And here’s the good news: Contrary to the popular perception of millennials, there is evidence this demographic group is as eager to own a house as previous generations.

The housing market has been on the rise in recent years and data indicates that trend will continue in 2017. The median home price is above its pre-recession peak:

Despite ongoing expansion of the home building industry since the Great Recession, home supply continues to shrink:

Mortgage rates are up slightly but remain near their recent historic lows. And, the outlook for the U.S. economy based on my ‘CHIME’ model is very encouraging:

CHIME means…

Consumer confidence – very strong (at a 15-year high)

Housing – home prices have steadily improved from 2010 through 2016 dramatically increasing home owner’s equity

Interest rates – 30-year U.S. mortgage rates bottomed at 3.4% in the summer of 2016. A spike in the U.S. 10-Year Treasury from 1.4% to 2.5% has pushed mortgage rates higher as well. However, at their current 4.4% level they remain close to all-time historic lows.

Manufacturing – showing expansion at 53.2% in November 2016

Employment – the unemployment rate is near a multiyear low of 4.7%

If the housing industry can tap the home-buying potential of the millennial generation in the coming years, it could significantly amp up the already solid housing sector.

According to the most recent Census Bureau data, “living in parents’ home” is the most common living arrangement among young adults. A stunning 32.1% of Americans aged 18-34 live with their folks. Incredibly it beats out “married or cohabitating in own house,” which describes 31.6% of that demographic group. Another 14% lives in “other” situations, which includes living with grandparents or other relatives.

Young men are the slowest to leave the nest. Over one-third of men 18-34 live with their parents as compared to 29% of women in the same age group.

By comparison, in the 1960s just 20% of young adults lived with their parents and 62% were married or cohabitating in their own home.

One factor behind this generational change is purely economic – jobs, or the lack thereof. Since the Great Recession, job growth for non-college educated young adults has been anemic. In 2014, men age 25-34 with only a high-school diploma had an unemployment rate of 12.2%. Without a steady job it’s hard to enter a long-term committed relationship or buy a home.

But there’s another reason these young people are still playing Xbox in the basement.

Young adults are slower to commit to romantic relationships and much slower to marry than previous generations. Just 26% of 18-to-33-year-olds are married. By comparison, 36% of Gen Xers, 48% of Baby Boomers and 65% of the Boomers’ parents’ generation were married during that same period of life.

Despite their jobs woes and reluctance to get hitched, millennials at least say they want to own a home of their own, if they can find the right one at the right price. In a survey conducted by Apartment Life, a whopping 79% of millennial renters said they want to buy a home. But affordability is a problem, with 77% saying that’s their biggest barrier to ownership. Interestingly, only 40% said they are waiting to settle down or get married before buying a home.

Millennials who have resources to purchase a house sometimes struggle to find one that appeals to them. Generally speaking, they are looking for walkable neighborhoods close to shopping and public transit. They have no interest in at the sprawling McMansions of their parents’ generation. They want/need affordability, flexibility and a sense of style in their houses. While research shows millennials are willing to live in the suburbs, their preferences are more common to urban areas.

I believe the coming years will see a significant housing powered by millennial buyers. If the economy continues to improve, and the industry creates more homes that appeal to 30ish first-time buyers, the millennials could reshape the housing sector over the next decade.

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Wes Moss is the host of Money Matters ' one of the country's longest running live call-in, investment and personal finance radio show ' on WSB radio. He is the Chief Investment Strategist at Capital Investment Advisors (CIA), and a partner at Wela, a digital financial advisory service. In 2017, Barron's named Wes ...Read more